AMP On Super: New Zealand Can Learn From Australia

An Australian
superannuation specialist says that New Zealand should at
least look at the Australian experience when developing a
national superannuation framework for the future. Both
countries face common issues, and there have been key
successes in Australia which New Zealand should draw on, as
well as some pitfalls to avoid.

Kevin Casey, Manager
Superannuation Strategy for AMP Australia, was in
Wellington last week to speak to Government officials, MPs,
key policy people and media about the how Australia is
preparing to look after its ageing population. He says
that although there are areas to be ironed out, the country
has adopted a three-tier system, which on the whole has
been highly successful.

"The key is in shared
responsibility," he says. "In Australia, responsibility
for an individual's retirement income is shared by
employers and individuals, as well as the Government. The
system is geared to encourage people to supplement the
assistance they receive from the Government, thereby
confining direct Government support for the pension to
around 3% of GDP. This compares to projections of 5-11% in
New Zealand over the next few decades." (Source: Office of
the Retirement Commissioner)

He says the Australian system
offers a good amount of choice in terms of contribution
levels, how the investment is managed and income streams in
retirement. "The system has been well accepted by
Australians, and a key contributing factor has been the
agreement between political parties on key elements,
ensuring stability of the core system. However Australia
must now work on enhancing the system in areas which are
not working well. In particular, compliance costs are far
too high."

John Drabble, General Manager of AMP Financial
Services New Zealand, says that there is no perfect
solution or quick fix. "What is clear, however, is that
like the Australians, we must achieve multi-party support
to ensure that our superannuation solution builds momentum
over time. In order to plan for their retirement well in
advance, New Zealanders need stability and certainty and a
clear long-term picture."

"We should draw on the lessons
Australia has learned in recent years, and decide for
ourselves what is right for New Zealand. The New Zealand
solution will undoubtedly involve compromise, and we need
to address the question of balance between incentives and
compulsion. But the fact that the superannuation issue is
complex and vexed should not in itself be an excuse for not
moving ahead."

Mr Drabble says that Government,
individuals, employers and financial services companies
need to work together to ensure that everything is in place
for New Zealanders as they retire. "No one group can solve
the retirement savings challenge on their own. This is a
shared responsibility, and we must work together to develop
a solution for the future."

"Retired New Zealanders can't
survive on just a lump sum. They also need income streams,
which can take care of their needs in retirement. To
achieve this, massive behaviour change is required and New
Zealanders will need to become more `engaged' about their
retirement savings. Such change is slow and difficult, but
achievable."

Mr Drabble says that employer sponsored
superannuation will be a key element. "Our experience is
that employer-sponsored super schemes are amongst the most
popular benefits provided by employers, and are a key
determinant in encouraging retirement savings. We see this
as an integral part of the total solution, and AMP is
already working with employers around the country to
provide this support for employees."

Mr Drabble says that
many New Zealanders find it difficult to plan for the
future. "But the reality is that they need to plan ahead
carefully to have the life that they want in the future.
AMP is committed to helping New Zealanders achieve
this."

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